InsiderOnline Blog: May 2013

Legalizing 11 million immigrants who are currently in the United States illegally, as proposed by the so-called “Gang of Eight” immigration reform being considered by the Senate, would cost taxpayers $6.3 trillion over the lifetimes of those legalized. That’s the finding from a new paper by Robert Rector and Jason Richwine, who estimate in detail how much the newly legalized population would pay in taxes and how much they would draw in benefits from means-tested federal programs. Some details of their analysis:

[I]n 2010, in the U.S. population as a whole, households headed by persons without a high school degree, on average, received $46,582 in government benefits while paying only $11,469 in taxes. This generated an average fiscal deficit (benefits received minus taxes paid) of $35,113.

The high deficits of poorly educated households are important in the amnesty debate because the typical unlawful immigrant has only a 10th-grade education. Half of unlawful immigrant households are headed by an individual with less than a high school degree, and another 25 percent of household heads have only a high school degree. […]

If amnesty is enacted, the average adult unlawful immigrant would receive $592,000 more in government benefits over the course of his remaining lifetime than he would pay in taxes.

Over a lifetime, the former unlawful immigrants together would receive $9.4 trillion in government benefits and services and pay $3.1 trillion in taxes. They would generate a lifetime fiscal deficit (total benefits minus total taxes) of $6.3 trillion. (All figures are in constant 2010 dollars.) This should be considered a minimum estimate. It probably understates real future costs because it undercounts the number of unlawful immigrants and dependents who will actually receive amnesty and underestimates significantly the future growth in welfare and medical benefits. […]

Following amnesty, the fiscal costs of former unlawful immigrant households will be roughly the same as those of lawful immigrant and non-immigrant households with the same level of education. Because U.S. government policy is highly redistributive, those costs are very large. [“The Fiscal Cost of Unlawful Immigrants and Amnesty to the U.S. Taxpayer,” by Robert Rector and Jason Richwine, The Heritage Foundation, May 6.]

The real cost of an amnesty could be larger than what Rector and Richwine have calculated. For example, they do not include in their estimate the cost that taxpayers will bear if the newly legalized immigrants choose—as they would have the right to do—to bring their spouses and children into the United States from abroad. Rector and Richwine also do not include the costs that would be generated from any fraudulently obtained legalizations or the cost of incentivizing future illegal immigration (which an amnesty now would do). The estimates also assume that means-tested programs will continue as they are currently set up; if instead those programs became more generous over time—as they have throughout the past 50 years—then taxpayers would have to spend even more money as a result of an amnesty.

Some critics of the study, including Doug Holtz-Eakin of the American Action Forum, have argued that this analysis is flawed because it looks only at the net fiscal cost to taxpayers, and doesn’t consider the overall effect of immigration on the economy. As Heritage’s Derrick Morgan points out, that argument isn’t really a critique of the Heritage methodology; it’s a criticism of the question Heritage has chosen to answer:

The complaint isn’t about what Rector has done, but rather what they want Heritage to do. […] Rector and Holtz-Eakin are studying two different questions. Rector’s study is a fiscal distributional analysis that focuses on amnesty for unlawful immigrants, a proposal that greatly concerns conservatives and The Heritage Foundation. Holtz-Eakin, by contrast, looks at “a benchmark immigration reform,” undefined, and then does a rough dynamic analysis that proceeds to ignore the fiscal effect highlighted by Rector. […]

Nearly all immigration will, by definition, increase the gross domestic product. The real test of any immigration or immigration reform is whether it makes current lawful residents better off by raising their after-tax incomes. This is why Heritage has consistently supported immigration of highly skilled immigrants who, according to Rector’s research, pay more in taxes than they receive in taxpayer-funded benefits. [The Foundry, April 23]

The notion that a study might be flawed for looking only at the fiscal consequences of an amnesty reflects the false choice at the heart of the Gang of Eight bill: That we can either fix everything that’s wrong with our immigration system all at once and include an amnesty, too, or we can have no immigration reform at all. As Rector and Jim DeMint point out, there’s no reason to do reform that way:

Instead of forcing through a complicated, lengthy bill, Congress ought to advance piece-by-piece immigration solutions that enjoy broad support and build trust with the American people. We should move to streamline our legal immigration system, encourage patriotic assimilation to unite new immigrants with America’s vibrant civil society, fulfill promises to secure our borders and strengthen workplace enforcement.

We are proudly a nation of immigrants. People the world over are attracted to the United States because we are a nation of laws. Granting amnesty to those who broke the law and putting them on a path to citizenship would be unfair, would encourage more bad behavior and would impose significant costs on American families. [Washington Post, May 6]